On Jan. 3, R-CALF CEO Bill Bullard sent a letter to several members of the Senate Judiciary Committee. In it, he requested the committee investigate a potential example of a monopsony—a situation where one buyer controls prices for a regional supply chain—in the cattle markets of the Northeast.
“We are requesting an investigation into potential antitrust and anticompetitive conduct in the Northeast region of the United States following evidence of market failure that occurred contemporaneously with the 2017 delisting of the JBS-owned beef packing plant in Souderton, Pennsylvania,” read the letter.
“The JBS-owned Souderton plant and the Cargill-owned Wyalusing plant are the major beef packing plants in Pennsylvania, and likely throughout the entire Northeast. On Oct. 25, 2017, the JBS plant was temporarily delisted by the U.S. Department of Agriculture (USDA) due to pest problems and, suddenly, one dominant cattle buyer exited the market.
“JBS’ withdrawal from the market caused immediate market failure in the region, with USDA reporting that cow prices fell $5 to $10 per cwt. during the week ending Nov. 3, 2017.”
Included with the letter was a request for investigation, complete with extensive citations and examples of USDA market reports commenting on the negative impact of the one-buyer situation.
The request asks that a Senate Judiciary Committee investigation be launched to determine if the involved plants engaged in unfair or deceptive market practices. It also asks that the committee look into potential collusion between the two plants, purposeful market manipulation on either plants’ part, and if the situation could have been prevented if the Justice Department had prevented a JBS merger that happened in the region in 2008, among other topics.
“The biggest obstacle that we have had in achieving reform to restore competition is the denial that any problem exists by the Justice Department, by the U.S. Department of Agriculture, by the industry,” Bullard told WLJ.
“They deny that there is any market failure that occurs under the current structure of our cattle markets. This complaint addresses that particular problem,” he added.
“The most important thing that we hope to accomplish is to definitively establish that market failure is occurring under the current structure of our U.S. cattle markets.”
R-CALF and the Buckeye Quality Beef Association of Ohio are both listed on the request for investigation.
Past to present
Bullard said he was hopeful that the Senate Judiciary Committee will take up the investigation.
“They have been receptive in the past,” he noted, highlighting an instance in 2008 when the committee investigated a potential merger between JBS and both the Smithfield Beef Group as well as the National Beef in Pennsylvania.
“At that time in 2008, the Senate Judiciary Committee chairman urged the Justice Department to block that merger, and as a result, the Justice Department blocked the merger between JBS and National Beef Packing Company, although they allowed the Smithfield Beef Group portion to move forward,” he said.
The partial nature of the blocked 2008 merger is a point of interest in the investigation request.
“If we identify the market failure today, that means the Justice Department erred in allowing previous mergers to go forward,” Bullard explained. “So, the Justice Department may be able to step in and make corrections because JBS recently acquired the Souderton plant that was a part of the Smithfield Beef Group merger that the Judiciary Committee had recommended not be allowed to go through.”
When asked what he expects might follow an investigation, Bullard saw two options—either divestiture or regulation. However, he repeatedly criticized the USDA and Agriculture Secretary Sonny Perdue for having withdrawn the so-called “Farmer Fair Practices,” which he characterized as having the power to have prevented the Pennsylvania situation.
“Giving producers the tools to protect competition might have been the most important thing that could have happened because something—some other mitigation measures—might have been put in place if the packers knew the producers could file a meaningful complaint with the Packers and Stockyards Administration and or filed litigation for the anti-competitive conduct that occurred at that time. That would have had a self-disciplining effect on the marketplace.” — Kerry Halladay, WLJ editor
